Tax advisers are getting in early this year, with a particular warning to small businesses to act now.
HLB Mann Judd Sydney tax partner Peter Bembrick said the economic uncertainty of the 2020–21 financial year should motivate SMEs to review tax planning strategies now — not at the last minute.
He said following a year of disturbances, small business owners and individuals should all be trying to maximise their returns and recoup any losses from past year’s downturn.
“There’s been a number of stimulus measures over the past year including JobKeeper and JobSeeker — some of which have already ceased — as well as the early release of superannuation scheme, so it’s important people get back on an even keel,” Mr Bembrick said.
“Lodging a tax return sooner rather than later also reduces any ongoing quarterly tax instalment payments, so the key message for taxpayers is to consider tax planning strategies now or risk paying pay a hefty price.”
Business owners need to be aware of their specific tax obligations as well as any measures designed to minimise the amount of tax paid.
Mr Bembrick has encouraged small businesses to pay particular attention to the following key areas:
- Super guarantee (SG): SG contributions must be paid by 30 June 2021 to qualify for a tax deduction in the 2020–21 financial year. The superannuation fund must receive these contributions by 30 June. He said some clearing houses can take more than a week to submit the payment to the super fund, so it would be advisable to ensure that superannuation is paid by mid-June where possible.
- Temporary full expensing (previously known as the instant asset write-off): Policies have been expanded again in the last two federal budgets as part of the government’s COVID-19 initiative to encourage business spending to improve cash flow. There is now no limit to the amount a small business can write off under this concession and, unlike larger businesses, small businesses with aggregated turnover less than $50 million receive a full write-off for secondhand assets. While the May 2021 federal budget extended the concession all the way up until 30 June 2023, there is still a timing advantage where claims can be made in 2020–21.
- Loss carry-back: Another concession introduced in the October 2020 federal budget and extended for a further 12 months in the May 2021 Budget, this concession allows a company (i.e. not available to partnerships, trusts or individuals) to “carry back” tax losses incurred in any of the 2019–2020, 2020–21, 2021–22 and 2022–23 income years to an earlier year as far back as 2018–19. A refund could be claimed on lodgement of tax returns from the 2020–2021 year onwards, representing the tax saving that would have arisen if the tax loss had been available to claim in the earlier year.
- Small business CGT concessions: Those operating a small business may be eligible for these concessions on the sale of business assets by a company or on the sale of shares in a company carrying on a business. The concessions may be available where aggregated turnover is less than $2 million or total net assets (excluding the family home and superannuation fund balances) less than $6 million, although the eligibility rules are quite strict, having been tightened significantly in recent years.
- Income deferral: Businesses may wish to delay tax payments on assessable income this financial year by deferring invoices until after 30 June. Income from the payments won’t be taxed until the following financial year.
Mr Bembrick explained that by utilising any available tax strategies now, both individuals and business will set the tone for the following financial year.
“Once taxpayers get into a habit of being fully across their tax administration and what needs to happen, and when, it becomes much easier and more efficient to manage,” Mr Bembrick said.
“Tax is an ever-changing legislative framework, and having one’s tax planning up to date can ensure any changes are utilised more effectively.”